German Income Tax: Residency vs. limited tax liability
German Income Tax Guide — Chapter: Residency & Scope
Residency vs. Limited Tax Liability
Last updated: 27 October 2025
At a glance: If you have a residence or habitual abode in Germany, you are unlimited tax liable on worldwide income (EStG §1). Without either, you are usually limited tax liable on specific German-source items only (EStG §49), with restricted allowances under §50. Some nonresidents can opt to be treated as residents under §1(3) (90%/basic-exemption test), and EU/EEA spouses may access joint filing via §1a.
8) FAQ
ℹ️ Click on a question to view the answer:
What makes me a German tax resident?
Having either a residence (AO §8) or a habitual abode (AO §9) in Germany triggers unlimited tax liability under EStG §1. A stay of more than six months generally creates a habitual abode from the start; short interruptions don’t break it.
If I’m nonresident, what income is taxed in Germany?
Only German-source items listed in EStG §49 (e.g., wages for German workdays, PE business profits, German real estate, certain investment income with German nexus). Withholdings may apply.
Do limited taxpayers get the basic allowance and family splitting?
No—under §50 EStG, the tariff applies without the basic allowance and most personal reliefs. However, you may qualify to be treated as resident under §1(3), and EU/EEA spouses may access joint assessment under §1a if conditions are met.
What if both countries consider me resident?
Tax treaties apply tie-breaker tests (permanent home, center of vital interests, habitual abode, nationality). If unresolved, the competent authorities can decide via MAP.
How do I apply for §1(3) treatment as a nonresident?
You apply in your German return and document that at least 90% of your income is taxable in Germany or your non-German income is below the basic allowance. Evidence of worldwide income is required.